| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 143-154 |
| Abstraksi Narasi | : | Explicitly stated client preferences are intended to persuade the auditor to accept a preferred outcome. This experimental study investigates two determinants of a preference`s persuasiveness-timing and client credibility. Sixty-four experienced auditors completed two hypothetical cases, one involving disclosure of a contingent liability and the other involving the collectibility of a customer account. The findings suggest that audit judgments regarding contingent liability disclosure may be biased toward a client`s preference if the preference is received prior to evidence evaluation (i.e., an early preference) but not if the preference is received at the end of the evidence evaluation process (i.e., a late preference). No such bias, however, is present for the collectibility judgment. Results also indicate that auditors who receive an early preference ask to examine more additional audit evidence to confirm or disconfirm the client`s preference remains unclear. Finally, no support is found for the ordinal interaction hypothesizing that only a highly credible client in the early preference condition will differentially influence contingent liability disclosure and accounts receivable collectibility judgments. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 13-28 |
| Abstraksi Narasi | : | This study examines the impact of the pressure to obtain potential client business opportunities on auditor judgments. Thirty-two lower rank auditors (staff and seniors) and 39 higher rank auditors (managers and partners) were either provided or not provided with information on additional client business opportunities when assessing a client`s potential inventory obsolescence risk. Lower rank auditors judged the obsoles-cence risk to be lower when provided with information on additional business opportunities than when such information was not provided. In contrast, there were no differences in the judgments of higher rank auditors when either provided or not provided with such information. These findings suggest that, through greater tacit management skills and exposure to other counter-pressures such as litigation and risk-management concerns, higher rank auditors are better able to manage competing goals and recognize the importance of freedom from client pressure than are lower rank auditors. Implications for training procedures and audit judgment research are discussed. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 93-108 |
| Abstraksi Narasi | : | This study examines how the Private Securities Litigation Reform Act of 1995 (PSLRA) affects auditors` incentives to curtail earnings management by client managers. The most significant reform of PSLRA was the elimination of joint and several liability under which auditors and other parties could be named to lawsuits because of ``deep pockets`` rather than culpability. While the elimination of joint and several liability provides significant relief to auditors from litigation, opponents of PSLRA argue that it discourages meritorious lawsuits and lowers audit quality, reducing investor confidence in markets. The potential benefit would be greatest for Big 6 firms, who have the highest exposure (largest clients) and significant resources to pay damages. In this paper we argue that if PSLRA induces decreases in audit quality, then we should expect increases in the prevalence of accruals after this Act. To investigate this issue we examine the discretionary accruals of a sample of 2,600 companies three years before and after the act. Our results support this hypothesis. Specifically, we find that after PSLRA income-increasing discretionary accruals rise for auditees of Big 6 firms but not for auditees of non-Big 6 firms. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 47-67 |
| Abstraksi Narasi | : | This study provides experimental evidence related to the management of audit task knowledge. Specifically, the research explores whether a certain type of task knowledge, loan credit review knowledge, develops differently for in-charge auditors working in different industry specializations. Since auditors are often asked to choose an industry specialization at the in-charge level, understanding whether certain industries provide the opportunity for differential knowledge development is important (Libby and Frederick 1990), especially if such knowledge can be transferred to aid performance in tasks completed in several other industries. As such, the study explores whether the task knowledge under investigation can be transferred across both industry and task contexts to aid performance in the going concern judgment, a task that is required to be completed in all industries. An experiment was administered to 60 in-charge auditors from one of the than Big 6 firms, with 32 participants specializing in the financial services industry and 28 in manufacturing. Importantly, financial services auditors have extensive experience evaluating the collectibility of loans and the underlying financial condition of borrowers; this knowledge is expected to also be valuable in assessing the going concern of any client. Participants evaluated the going concern status of four cases of actual troubled clients from two industry settings: manufacturing and casino gambling. The findings support the transferability of knowledge across task and industry contexts. This result is important because it is the first study in the audit literature to demonstrate that a specific type of task knowledge can be transferred across both task and industry contexts (Bedard and Chi 1993). In so doing, the results provide an important theoretical foundation for audit researchers and practitioners regarding the conditions for the transfer and dissemination of audit knowledge throughout a firm. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 29-45 |
| Abstraksi Narasi | : | As part of their risk management strategy, large audit firms have established a second partner review process during client screening. It is unclear, however, whether review partners are biased by the engagement risk assessment that is provided to them by a contact partner as a part of this process. Of particular interest are cases where the contact partner`s engagement risk assessment is overly favorable when compared to the underlying evidence. We report the results of an experiment where approximately one-half of the review partners received an engagement risk assessment that was overly favorable when compared to the underlying evidence, while the other half of the review partners received an assessment that was more consistent with the client data provided. We examined the effect of this manipulated difference on review partner engagement risk assessments, acceptance judgments, fee judgments, and justification activity. Results from a sample of 78 audit partners reveal that, on average, they were not influenced by differences in the contact partner`s assessment when rendering their own engagement risk assessments. However, the acceptance and fee judgments of the partners who received overly favorable risk assessments were more conservative than those of the partners who received a more consistent assessment. In addition, justification activity was greater for the group who received overly favorable judgments. These results imply that a second partner review appears to aid auditing firms in avoiding overly risky clients during the acceptance process. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 155-163 |
| Abstraksi Narasi | : | The SEC changed its rules recently and required companies to disclose information about audit and nonaudit fees, asserting that such data would be useful for shareholders in making their investment and voting decisions. An analysis of shareholder votes at 172 of the Fortune 1000 companies indicates that the proportion of shareholder voting against or abstaining from ratification of the external auditor is positively associated with the level of the nonaudit fee ratio. The results provide empirical support to the SEC`s assertion that disclosure of fees paid to the auditor can influence shareholders` voting decisions. However, even in companies with very large nonaudit fee ratios (exceeding 4.0), the average shareholder ratification rate was about 97 percent. This suggests that a large majority of shareholders did not perceive auditor independence to be impaired, even in the presence of relatively high nonaudit fees. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 181-194 |
| Abstraksi Narasi | : | This study investigates the information content of FRR No. 31 reportable events (SEC 1988) communicated by auditors to clients in the two fiscal years and interim period preceding auditor changes. Reportable events identify weaknesses in internal control and problems related to the reliability of management representations and/ or financial statement reliability. We examine 1,264 auditor changes (with available stock price data) over the period 1993 to 1996, including 118 companies with reportable events. Our findings suggest that reportable events disclosed in Form 8-K filings of auditor changes are considered by investors to have information content. We find a -2.75 percent (-5.53 percent) cumulative abnormal return over a three-day (seven-day) announcement period surrounding the disclosure of reportable events in Form 8-K filings. The conclusion that reportable events offer useful information to investors is robust to alternative specifications of expected returns and to controls for other disclosures (resignations and disagreements) made when auditor changes occur. Further tests also highlight differential information content among the types of reportable events. Specifically, stock prices act as if investors find reportable events about reliability issues more informative than reportable events about internal control weaknesses. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 69-91 |
| Abstraksi Narasi | : | Assurance services firms have attempted to mitigate turnover and personnel shortages by offering flexible work arrangements (FWAs) to their professional staff. Little is known however, about what factors affect whether these professionals choose to adopt a FWA. This study examines factors potentially associated with both intentions to adopt and ultimate adoption of a FWA for a sample of seniors, managers, and partners at two national and one regional assurance services firms. Results indicate that intentions to adopt a FWA are significantly affected by the importance of opinions of workplace referents, family considerations, and gender. A Marginally significant effect was also found for likelihood of organizational support and work consequences. A subset of these factors was found to affect actual adoption of a FWA. The results are discussed in terms of implications for the human resources department of assurance services firms striving to create an appropriate work/ family balance for their professionals as well as suggesting avenues for future research. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 165-179 |
| Abstraksi Narasi | : | Litigation may be harmful in terms of direct costs such as damages and defense costs, as well as indirect costs such as harming the auditor`s general reputation and name. When a case is initiated, the auditor may choose to settle out of court or fight. Often settling is less costly in the short run, but may be costlier in the long run as the auditor develops a reputation for not fighting, thus, inducing greater future litigation. This study investigates whether reputational concerns for future litigation motivate auditors to strategically take costly actions to fight rather than settle. I use an experiment involving 48 partners to examine auditors` actions in a situation where auditors report their litigation outcomes to future litigants, allowing them to develop reputations, and a situation where auditors do not report their litigation outcomes. As predicted, I find that auditors take costly actions to protect their litigation reputation. Auditors are more likely to predict that their side will win and have more difficulty settling, even if settling is less costly, when reputation can be protected as compared to when it cannot. In contrast, inexperienced auditors are not influenced by reputation concerns. Thus, litigation reputation concerns that influence auditors` decisions and actions appear to develop with an auditor`s experience and tenure in the audit profession. |
| Nama Pengarang | : | - |
| Nama Majalah/Jurnal | : | Auditing: A Journal Of Practice and Theory |
| Volume / Nomor Edisi | : | - |
| Nomor Halaman | : | 109-126 |
| Abstraksi Narasi | : | Accrual-based earnings is considered superior to cash flows. Accruals allow managers to communicate their private and inside information and thereby improve the ability of earnings to reflect underlying economic value. However, managers could engage in aggressive reporting of accruals that would seriously undermine the informativeness of reported earnings. Since outsiders cannot directly observe earnings, high-accrual firms face greater agency costs relative to low-accrual firms. Auditing plays an important role in mitigating these agency costs by constraining opportunistic management of accruals. This study examines whether there is a linkage between audit quality and pricing of discretionary accruals. The findings indicate that the association between stock returns and discretionary accruals is greater for firms audited by Big 6 auditors than for firms audited by non-Big auditors. Further, discretionary accruals of clients of Big 6 auditors have a greater association with future profitability than discretionary accruals of clients of non-Big 6 auditors. |
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